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Chapter 02_Test Bank KEY
1. In order to measure what a country produces, we:
A. Summarize total output in physical terms.
B. Count units of output.
C. Count the weight of different products.
D. Summarize the monetary value of output.

Using monetary value instead of physical units to compare total output, the accounting is easier.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

2. GDP can be found by:
A. Adding the monetary value of all final goods and services produced during a given period of
time.
B. Adding the physical amount of all final goods and services produced during a given period of
time.
C. Taking the difference between exports and imports during a given period of time.
D. Adding the value of all final output produced and measuring it in constant prices during a
given period of time.

GDP is a summary measure of a nation’s output.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

3. Ceteris paribus GDP most closely measures:
A. Output per worker.
B. A summary of the world's output.
C. The total value of all final goods and services produced within a nation's borders in a given
year.
D. The rate of change in capital stock.

GDP can be found by adding the monetary value of all final goods and services.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

4. The output of cell phones can be added to the output of refrigerators in order to compute GDP
by:

2-1
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A. Multiplying the output of each by the corresponding prices and adding these dollar values.
B. Dividing the output of each by price and adding these dollar values.
C. Adding up the physical number of cell phones and refrigerators produced.
D. Dividing dollar values of output for each by price and adding the results.

By multiplying the physical output of each good by its price the total value of each good
produced can be determined.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

5. Country’s GDP is:
A. The sum of the physical amounts of goods and services in the economy.
B. A dollar measure of output produced within a nation's borders during a given time period.
C. A measure of the per capita economic growth rate of the economy.
D. A physical measure of the capital stock of the economy.

GDP enables us to sum production of all goods and services

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

6. Which of the following is NOT included in U.S. GDP?
A. Toys produced by a U.S. firm located in China.
B. Beer brewed in Colorado and purchased by a German tourist.
C. A car made by a Japanese auto producer in Kansas.
D. Corn grown in Iowa and exported to Africa.

GDP measures only those products produced within a nation’s borders.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

7. Which of the following is NOT included in U.S. GDP?
A. The construction of new homes to replace those destroyed by fires in California.
B. The salary of the President of the United States.
C. Shoes produced abroad and imported by a U.S. company.
D. The purchase of U.S. soybeans by a food manufacturer in Canada.

To be counted in GDP goods must be produced within a nation’s borders.



2-2
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
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AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

8. The value of output produced in the United States in current prices measures:
A. GDP growth.
B. Real GDP.
C. Per capita GDP.
D. Nominal GDP.

Nominal GDP is the value of output measured in current prices.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

9. Nominal GDP measures the:
A. Inflation-adjusted value of output.
B. Real value of output per worker.
C. Value of output produced in current prices.
D. Value of output produced in constant prices.

Nominal GDP is the value of output in the U.S. in current prices.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

10. Nominal GDP is affected by changes in:
A. Output only.
B. Output and prices.
C. Income transfers.
D. Prices only.

Nominal GDP measures the value of output produced in current prices.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Explain how an economy's size is measured.
Topic: WHAT AMERICA PRODUCES

11. Changes in real GDP serve as a better measure of the health of the economy than changes in
nominal GDP because real GDP is affected by changes in:
A. Output only.
B. Prices and output.

2-3
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